Question

On June 30, 20X4, after paying the semi-annual interest due and recording amortization of bond discount, Hake redeemed its 15 year, 8% $1,000,000 par bonds at 102. The bonds, which had a carrying amount of $940,000 on January 1, 2014, had originally been issued to yield 10%. Hake uses the effective interest method of amortization and had paid interest and recorded amortization on June 30.
Compute the amount of gain or loss on redemption of the bonds and select the proper financial statement category.

Answer 1

Explanation:

On June 30, 20X4, after paying the semi-annual interest due and recording amortization of bond discount, Hake redeemed its 15 year, 8% $1,000,000 par bonds at 102. The bonds, which had a carrying amount of $940,000 on January 1, 2014, had originally been issued to yield 10%. Hake uses the effective interest method of amortization and had paid interest and recorded amortization on June 30.

Compute the amount of gain or loss on redemption of the bonds and select the proper financial statement category.